British drugs giant GlaxoSmithKline has agreed a tie-up with US rival Pfizer to merge their consumer healthcare divisions to create a business with combined sales of £9.8 billion.

The deal paves the way for a break-up of Glaxo into two separate UK-based companies – one focused on pharmaceuticals and vaccines, and the other on consumer healthcare – within three years of the completing joint venture.

Glaxo admitted there will be an impact on staff under aims to slash annual costs by £500 million following the Pfizer deal, but said it was too early to give details.

https://twitter.com/GSK/status/1075293157460508673

Emma Walmsley, chief executive of Glaxo, said: “Obviously there’s going to be some impact on people.

“That’s something we are working through and we will certainly be talking to our employees before we start talking about that in any way publicly.”

British drugs giant GlaxoSmithKline has agreed a tie-up with US rival Pfizer to merge their consumer healthcare divisions to create a business with combined sales of £9.8 billion (Andy Buchanan/PA)

Shares rose 7% after the deal was announced.

Under terms of the all-share deal, Glaxo will own 68% of the consumer healthcare joint venture, while US firm Pfizer will own the remaining 32% stake.

It will bring together Glaxo’s brands such as Sensodyne, Aquafresh and Panadol with Pfizer’s Advil and Centrum.

The firms are aiming to complete the joint venture in the second half of 2019.

It comes after pressure from shareholders for Glaxo to spin off its consumer division.

But Ms Walmsley said plans to make the consumer business a separate listing in a few years’ time would allow Brexit “uncertainties” to subside.

“I’m confident we’ll be in a more stable environment than we are in today,” she said.

On Brexit contingency planning, she added: “For GSK, what we’re focused on in terms of Brexit, whatever the scenario might be, is ensuring the supply of vaccines and products that people need.

“We have been working on that for some time with the Government and we’re confident we can be ready in all scenarios for that.”

The consumer healthcare joint venture will be the market leader after the tie-up, with a 7.3% share and a presence in more than 100 countries.

The deal comes after Glaxo pulled out of an auction for Pfizer’s consumer business earlier this year.